"This is the first study that comprehensively shows that companies that fail to maintain those good relationships with local communities actually take a huge hit to their bottom line," says Dr Daniel Franks of the University of Queensland's Centre for Social Responsibility in Mining and colleagues.

"We were surprised by the enormous scale of the costs that we were able to find," says Franks.

He says the most frequent cost was from delays but the largest costs were when a project was abandoned.

The researchers found one world-class mining project lost US$2.7 million a day due to delays.

And in 2011, construction on a copper and gold project in Peru was suspended following protests over water security, risking US$2 billion in capital expenditure.

Closer to home

Meanwhile in Australia residents and the thoroughbred industry united into 2010 to stop a coal mine project in the Hunter Valley and there has been growing conflict over coal seam gas projects.

Franks and colleagues found risks to the environment, and particularly impacts on water resources were the most common issues to lead to conflict.

"Water is a big driver of conflict in the mining sector internationally and it's no difference with coal seam gas," says Franks.

He says while oil and gas has traditionally been remote and offshore, coal seam gas projects can be a lot closer to where people live and farm.

"It has a wider footprint so therefore I think it's more exposed and community relationships are more important," says Franks.

And investors themselves are now wary of conflict between community and companies, he says.

Credit Suisse, which advises investors on stock values, this year applied a 2.9 per cent discount on its corporate valuation of AGL Energy, to account for the risk of delays due to community opposition to hydraulic fracturing at their planned Gloucester coal-seam gas project.

In 2012 Credit Suisse found "environmental, social and governance risks" across the Australian Stock Market were worth A$21.4 billion, with the greatest risk (worth A$8.4 billion) in the mining, oil and gas sector.

Role of governments

Franks says governments need to set high standards that reduce the cost to business from conflict, and ultimately create an attractive investment environment.

But unfortunately, he says, governments, including in Australia, have rolled back policies that would do this, including reducing environmental regulations - so-called 'green tape'.

"My personal view is that's a mistake," says Franks, adding that while this might reduce costs in the short term, it will be lead to costs from conflict in the long term.

"We've demonstrated through this study that rules and regulations that ensure higher environmental standards are actually good for business."

Avoiding escalation

Franks says while companies pay a lot of attention to conflict when it arises, engagement with the community needs to happen at the start of projects, before a company has too much invested.

He says this is most likely to avoid costly escalation of conflict and reduce the chance of a bad investment.

"This is not something that is abstract," says Franks. "This is something that the best practice companies are doing at the moment, and something that the International Council for Mining and Metals argues that companies should be doing."

He emphasises companies' dialogue with communities needs to be "meaningful" and impact on the direction of events.

"Communities are quick to understand when a process is not going to lead to an outcome that will resolve the," says Franks.

["We're talking about human rights and the ability for communities to have a say in projects," he adds.

"Respecting rights is not only a moral imperative, it's a business imperative as well."]